FUNDAMENTALS OF ACCOUNTING AND AUDITING

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THE INSTITUTE OF COMPANY SECRETARIES OF INDIA,TIMING OF HEADQUARTERS. Monday to Friday,Office Timings 9 00 A M to 5 30 P M. Public Dealing Timings, Without financial transactions 9 30 A M to 5 00 P M. With financial transactions 9 30 A M to 4 00 P M,41504444 45341000. 011 24626727,www icsi edu,info icsi edu, Laser Typesetting by AArushi Graphics Prashant Vihar New Delhi and.
Printed at M P Printers 10000 February 2012,FOUNDATION PROGRAMME IMPORTANT NOTE. The study material has been written in lucid and simple language and conscious efforts have been made to. explain the fundamental concepts and principles of accounting and auditing This study material is divided into. two main parts,Part A Fundamentals of Accounting and. Part B Fundamentals of Auditing, The institute has decided that the first examination for Foundation Programme under new syllabus will be held. from December 2012 session in the Optical Mark Recognition OMR format whereby students are required to. answer multiple choice questions on OMR sheet by darkening the appropriate choice by HB pencil One mark. will be awarded for each correct answer There is NO NEGATIVE mark for incorrect answers. The specimen OMR sheet is appended at the end of the study material There are two self test question papers. in the study to acquaint students with the pattern of examination These are for practice purpose only not to be. sent to the institute, For supplementing the information contained in the study material students may refer to the economic and. financial dailies commercial legal and management journals Economic Survey latest CS Foundation Course. Bulletin Suggested Readings and References mentioned in the study material and relevant websites. The objective of the study material is to provide students with the learning material according to the syllabus of. the subject of the Foundation Programme In the event of any doubt students may write to the Directorate of. Academics and Professional Development in the Institute for clarification at faa icsi edu. Although due care has been taken in preparing and publishing this study material yet the possibility of errors. omissions and or discrepancies cannot be ruled out This publication is released with an understanding that the. Institute shall not be responsible for any errors omissions and or discrepancies or any action taken on the basis. of contents of the study material, Should there be any discrepancy error or omission noted in the study material the Institute shall be obliged if.
the same are brought to its notice for issue of corrigendum in the CS Foundation Course Bulletin. PAPER 4 FUNDAMENTALS OF ACCOUNTING AND AUDITING,Level of Knowledge Basic Knowledge. Objective To familiarize and develop an understanding of the basic aspects of accounting auditing concepts. and their principles,PART A FUNDAMENTALS OF ACCOUNTING 70 MARKS. 1 Theoretical Framework, Meaning and Scope of Accounting Accounting Concepts Accounting Principles Conventions and. Standards Concepts Objectives Benefits Accounting Policies Accounting as a Measurement. Discipline Valuation Principles Accounting Estimates. 2 Accounting Process, Documents Books of Accounts Invoice Vouchers Debit Credit Notes Day books Journals. Ledgers and Trial Balance, Capital and Revenue Expenditures and Receipts Contingent Assets and Contingent Liabilities.
Rectification of Errors,3 Bank Reconciliation Statement. Meaning Causes of difference between Bank Book Balance and Balance as per Bank Pass Book. Bank Statement Need of Bank Reconciliation Statement Procedure for Preparation of Bank. Reconciliation Statement,4 Depreciation Accounting. Methods Computation and Accounting Treatment of Depreciation Change in Depreciation Methods. 5 Preparation of Final Accounts for Sole Proprietors. Preparation of Profit Loss Account Balance Sheet,6 Partnership Accounts. Nature of and Factors Affecting Goodwill, Methods of Valuation Average Profit Super Profit and Capitalization Methods. Treatment of Goodwill,Final Accounts of Partnership Firms.
Admission of a Partner,Retirement Death of a Partner. Dissolution of a Partnership Firm,7 Introduction to Company Accounts. Issue of Shares and Debentures Forfeiture of Shares Re Issue of Forfeited Shares Redemption of. Preference Shares,PART B FUNDAMENTALS OF AUDITING 30 MARKS. 8 Auditing,Concepts and Objectives,Principles of Auditing. Types of Audit,Evidence in Auditing,Audit Programmes.
9 Audits and Auditor s Reports,Internal Audit, Statutory Auditor Appointment Qualification Rights and Duties. Secretarial Audit An Overview,Cost Audit An Overview. Auditor s Report Meanings Contents Types Qualifications. LIST OF RECOMMENDED BOOKS,PAPER 4 FUNDAMENTAL OF ACCOUNTING AND AUDITING. 1 M C Shukla Advanced Accounts Vol I S Chand Company Ltd Ram Nagar New Delhi 55. T S Grewal, 2 R L Gupta Financial Accounting Sultan Chand Sons New Delhi 2. 3 J R Monga Financial Accounting Concepts Applications Mayoor Paperbacks A 95 Sector. 5 Noida U P, 4 S N Maheshwari Advanced Accounting Volume I Vikas Publishing House Pvt Ltd Jangpura.
S K Maheshwari New Delhi 14, 5 S P Jain Advanced Accounting Volume I Kalyani Publishers Daryaganj New Delhi 2. K L Narang, 6 Ashok Sehgal Advanced Accounting Financial Accounting Taxmann s New Delhi. Deepak Sehgal, 7 Aruna Jha Student s Guide to Auditing Assurance Taxmann Publications Pvt Ltd New. Rohtak Road New Delhi, 8 S D Sharma Auditing Principles Practice Taxmann Publications Pvt Ltd New Rohtak Road. 9 Anand G Srinivasan Auditing Taxmann Publications Pvt Ltd New Rohtak Road New Delhi. 10 S Sundharababu A Handbook of Practice Auditing S Chand S Sundharsanam B N Tondon. Company New Delhi,REFERENCES, 1 T P Ghosh A Banerjee Principles and Practice of Accounting Galgotia Publishing Company New Delhi 5.
K M Bansal, 2 P C Tulsian Financial Accounting Sultan Chand Company New Delhi. 3 R Narayanaswamy Financial Accounting A Managerial Prospective PHI Learning Pvt Ltd. 4 Ashish K Bhattacharyya Essentials of Financial Accounting PHI Learning Pvt Ltd. This study material is sufficient from the point of view of syllabus The students may refer these books for further knowledge and study. of the subject,PART A FUNDAMENTALS OF ACCOUNTING,THEORETICAL FRAMEWORK. Accounting 3,Review Questions 5,Book Keeping 5,Systems of Accounting 6. Accounting as Information System 7,Role of Accountant 8. Accounting Principles Concepts and Conventions 9,Accounting Standards 12.
Accounting Policies 13,Accounting A Measurement Discipline 13. Accounts and its Classification 13,Review Questions 15. Double Entry System 15,Rules of Debit and Credit 16. Accounting Equation 18,LESSON ROUND UP 18,GLOSSARY 19. SELF TEST QUESTIONS 19,ACCOUNTING PROCESS I RECORDING OF TRANSACTIONS.
Accounting Cycle 24,Journal 24,Subsidiary Books of Accounts 33. Purchases Book 34,Sales Book 34,Purchases Returns Book 34. Sales Returns Book 35,Bills Receivable Book 39,Bills Payable Book 40. Cash Book 40,Review Questions 42,Petty Cash Book 44. General Journal 46,Trial Balance 48,LESSON ROUND UP 54.
GLOSSARY 55,SELF TEST QUESTIONS 55,ACCOUNTING PROCESS II RECTIFICATION OF ERRORS. Classification of Errors 60,Errors Disclosed by Trial Balance 61. Errors Not disclosed by Trial Balance 62,Review Questions 62. Steps to locate Errors 63,Rectification of Errors 63. Before the preparation of Trial Balance 63, After the preparation of Trial Balance but before the preparation of Final Accounts 67.
In the next accounting period 70,LESSON ROUND UP 78. GLOSSARY 78,SELF TEST QUESTIONS 78,ACCOUNTING PROCESS III CAPITAL AND REVENUE ITEMS. Capital Expenditure 82,Revenue Expenditure 82,Deferred Revenue Expenditure 82. Capital and Revenue Receipts 83,Capital and Revenue Profits 84. Capital and Revenue Losses 84,Review Questions 84,Contingent Assets 86.
Contingent Liability 87,LESSON ROUND UP 87,GLOSSARY 88. SELF TEST QUESTIONS 88,BANK RECONCILIATION STATEMENT. Introduction 92,Review Questions 93, Causes of difference between Bank Balance as per Cash Book and Pass Book 93. Significance of Bank Reconciliation Statement 94, Procedure of preparing Bank Reconciliation Statement 94. Preparation of Bank Reconciliation Statement when overdraft balances are given 96. Preparation of Bank Reconciliation Statement when extracts of cash book and pass book are given 98. Illustrations 98,LESSON ROUND UP 108,GLOSSARY 108,SELF TEST QUESTIONS 109.
DEPRECIATION ACCOUNTING,Introduction 114,Accounting Concept of Depreciation 116. Review Questions 117,Methods of Providing Depreciation 118. Uniform Charge Methods 118, Fixed Instalment Method or Straight Line Method 118. Depreciation Fund Sinking Fund Method 120,Insurance Policy Method 124. Annuity Method 126,Declining Charge Depreciation Methods 128.
Diminishing Balance Method Reducing Balance Method 128. Sum of Years Digits Method 130,Double Declining Balance Method 130. Other Methods 131,Change in Method of Depreciation 132. Calculation of Profit or Loss on Assets Sold 133,Depreciation and Replacement of Assets 136. LESSON ROUND UP 137,GLOSSARY 137,SELF TEST QUESTIONS 137. PREPARATION OF FINAL ACCOUNTS FOR SOLE PROPRIETORS. Introduction 142,Trading Account 142,Profit Loss Account 143.
Review Questions 144,Balance Sheet 145,Review Questions 146. Classification of Assets 146,Classification of Liabilities 146. Adjustment Entries 148,Closing Entries 157,Manufacturing Account 158. Limitations of Financial Statements 159,Illustrations 160. LESSON ROUND UP 172,GLOSSARY 172,SELF TEST QUESTIONS 172.
PARTNERSHIP ACCOUNTS,Basic Concepts of Partnership 180. Goodwill 182,Methods of Valuation of Goodwill 183,Preparation of Final Accounts of Partnership 185. Profit Loss Appropriation Account 185,Reconstitution of Partnership 195. Change in Profit Sharing Ratio 195,Admission of a Partner 197. Retirement of a Partner 217,Death of a Partner 232.
Dissolution of Partnership Firm 239,LESSON ROUND UP 254. GLOSSARY 255,SELF TEST QUESTIONS 256,INTRODUCTION TO COMPANY ACCOUNTS. Basic Concepts of Company Accounts 262,Issue of Shares 263. For Cash 264,Under Subscription of Shares 272,Over Subscription of Shares 272. Calls in Advance and Interest on Calls in Advance 273. Calls in Arrears and Interest on Calls in Arrears 277. Issue of shares for consideration other than cash 279. Forfeiture of Shares 283,Re issue of Forfeited Shares 285.
Review Questions 291, Forfeiture and Re issue of Shares allotted on Pro Rata basis in case of over subscription 291. Issue of Debentures 295,For cash 295,For consideration other than Cash 301. As Collateral Security 302,Redemption of Preference Shares 304. LESSON ROUND UP 313,GLOSSARY 314,SELF TEST QUESTIONS 315. PART B FUNDAMENTALS OF AUDITING,CONCEPT OF AUDITING.
Introduction 319,Meaning of Audit 319,Principal Aspects to be Covered in Audit 320. Benefits of Auditing 321,Limitations of Auditing 321. Review Questions 322,Investigation 322,Difference between Auditing and Investigation 322. LESSON ROUND UP 323,GLOSSARY 324,SELF TEST QUESTIONS 324. TYPES OF AUDIT,Internal Audit 329,Review Questions 331.
Financial Audit 331,Secretarial Audit 332,Cost Audit 332. Tax Audit 333,Review Questions 333,Bank Audit 333,Co operative Society audit 333. Trust Audit 334,Insurance Audit 334,Partnership Audit 334. Sole Proprietorship Audit 334,Government Audit 334. Management Audit 334,Functional Audit 334,Propriety Audit 334.
Efficiency Audit 335,LESSON ROUND UP 335,GLOSSARY 336. SELF TEST QUESTIONS 336,TOOLS OF AUDITING,Audit Plan 340. Audit Programme 340,Review Questions 342,Audit Evidence 342. Working Papers 343,Review Questions 345,LESSON ROUND UP 345. GLOSSARY 346,SELF TEST QUESTIONS 346,AUDITOR AND RELATED PROVISIONS.
Who is an Auditor 350,Appointment of Auditor 350,Qualification of Auditor 351. Review Questions 351,Disqualification of Auditor 351. Rights and Powers of Auditor 352,Duties of Auditor 352. Auditors Report 353,Auditors Opinion 355,Review Questions 356. LESSON ROUND UP 356,GLOSSARY 357,SELF TEST QUESTIONS 358.
TEST PAPERS 2012,Test Paper 1 2012 359,Test Paper 2 2012 376. FUNDAMENTALS OF ACCOUNTING,LEARNING OBJECTIVES,In today s business world accounting is. 1 Theoretical Framework,considered as the universal language of. business because it is the vehicle for reporting, 2 Accounting Process I financial information about a business entity to. Recording of Transactions users such as shareholders and managers A. proper accounting system is essential to any,business whether big or small in order to manage.
3 Accounting Process II,its daily functions and run it successfully The. Rectification of Errors,main obligation of any business is to maximize. profits minimize losses and at the same time, 4 Accounting Process III maintain its position as a responsible entity within. Capital and Revenue Items the society,So in the current business world everybody. FUNDAMENTALS OF ACCOUNTING LESSONS LEARNING OBJECTIVES In today s business world accounting is considered as the universal language of business because it is the vehicle for reporting financial information about a business entity to users such as shareholders and managers A proper accounting system is essential to any business whether big or small in order to manage its daily

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